Ready to Make Your Move?
November Quick Stats
Denver Metro Single Family Housing Stats:
Active Listings: 7,336
- Down 28% from Nov. ‘11
Under Contract: 3,119
- Up 14% from Nov. ‘11
Sold: 2,975
- Up 20% from Nov. ‘11
Average Price: $306,773
- Up 11% from Nov. ‘11
Average Days on Market: 72
- Down 27% from Nov. ‘11
Denver Metro Condo Housing Stats:
Active Listings: 1,511
- Down 38% from Nov. ‘11
Under Contract: 774
- Up 23% from Nov. ‘11
Sold: 717
- Up 19% from Nov. ‘11
Average Price: $198,080
- Up 29% from Nov. ‘11
Average Days on Market: 64
- Down 39% from Nov. ‘11
Real Estate News
The housing market recovery should continue through the coming years, assuming there are no further limitations on the availability of mortgage credit or a “fiscal cliff,” according to forecast presentations at a residential forum for the 2012 Realtors® Conference and Expo.
Lawrence Yun , chief economist of the National Association of Realtors®, said the housing market clearly turned around in 2012. “Existing-home sales, new-home sales and housing starts are all recording notable gains this year in contrast with suppressed activity in the previous four years, and all of the major home price measures are showing sustained increases,” he said.
Yun sees no threatening signs for inflation in 2013, but projects it to be in the range of 4 to 6 percent by 2015. “The huge federal budget deficit is likely to push up borrowing costs and raise inflation well above 2 percent,” he said.
Rising rents, quantitative easing (the printing of money), federal spending outpacing revenue, and a national debt equal to roughly 10 percent of Gross Domestic Product are all raising inflationary pressures.
With rising demand and an ongoing decline in housing inventory, Yun expects meaningfully higher home prices. The national median existing-home price should rise 6.0 percent to $176,100 for all of 2012, and increase another 5.1 percent next year to $185,200; comparable gains are seen in 2014.
“Real estate will be a hedge against inflation, with values rising 15 percent cumulatively over the next three years, also meaning there will be fewer upside-down home owners,” Yun said. “Today is a perfect opportunity for moderate-income renters to become successful home owners, but stringent mortgage credit conditions are holding them back.”
“People who purchased homes at low prices in the past couple years, including many investors, can expect healthy growth in home equity over the next four years, while renters who were unable to get into the market will be in a weaker position because they are unable to accumulate wealth,” he said. “Not only will renters miss out on the price gains, but they’ll also face rents rising at faster rates.”
Buyers
I often get the question, “How much of a discount can I get off the asking price?” Well, the answer may surprise you. In both good times and bad the average discount hovers right around 3 percent. Why? It’s simple seller psychology.
Sellers HATE to give a large discount to a buyer. They have a tangible, emotional resistance to dropping the price too much to meet an offer. But, after having their property sit on the market for a while with no bites, many grudgingly come to realize they have to drop the price to move it. Here’s a typical scenario:
Consider a property that went on the market for $200,000 on August 1st. For two weeks it has no showings, then Bob Buyer sees it and offers $180,000 (a 10 percent discount). Horrified, Sally Seller refuses (in a huff of resentment!).
A month later there have been just a couple of looky-loo showings so Sally Seller meets with her listing agent to strategize. The listing agent provides recent comps and Sally Seller finally agrees to drop the price to $185,000 to get some action on the property. Bob Buyer sees it again, and again offers $180,000. Sally Seller accepts! The discount she gave was only 3 percent of her FINAL asking price, so she’s ok with it. Bob Buyer’s patience got him a solid deal and now YOU better understand market psychology. Strange as it may seem, this dynamic plays out over and over again in the residential real estate market.
To learn even more about how buyers and sellers think, drop me a line and let’s talk about it.
Sellers
One of the metrics I like to use to gauge the market is to look at the number of showings per/active listing per/month. Basically, the more showings/active listing/month, the more closings I expect a month or two down the road. This graphic shows these numbers both by price range of home ($50k – $100k, $100k – $150k, etc.) and as a total for the entire market. What we see is that the more people there are out looking for properties the more housing sales we’ll see. It’s incredible to observe how our housing market has strengthened over the past couple of years as more than 40 percent more buyers are in the market than there were two years ago. If you’re interested in listing your property or even just testing the market out give me a call so I can give you more information.
Investors
For investors who buy and hold properties a low vacancy rate is music to their ears. Metro Denver is currently experiencing some of the lowest rates in its history. In fact, current vacancy rates are at the lowest in the last 12 years, according to a Vacancy and Rent Survey released recently by the Apartment Association of Metro Denver.
The vacancy rate for metro Denver 1-4 unit properties is 2.3 percent and for apartments it’s 4.3 percent in the third quarter, the lowest vacancy rate recorded since the same quarter in 2000. That vacancy rate stood at 3.4 percent and 4.9 percent respectively for the same quarters in 2011. Except for Douglas County, every county saw average vacancy rates decrease.
“Considering that we were already under 5 percent vacancy, this additional drop is significant,” Ron Throupe, professor of real estate at the University of Denver’s Burns School of Real Estate and Construction Management and author of the report, said in a statement. “Rent growth hit an 11-year high during the second quarter, but there is still enough demand out there to keep filling up units.”
Nationally, the housing market picked up more momentum in August, as the average home price for 20 major cities jumped 0.9 percent according to the S&P/Case-Shiller home price index. The increase marked the fifth consecutive month of gains for the index with all but one city, Seattle, recording month-over-month price increases. “The sustained good news in home prices over the past five months makes us optimistic for continued recovery in the housing market,” said David Blitzer, spokesman for S&P.
Mortgage
Last month’s mortgage rate market was heavily dependent on speculation about the presidential election. Now that we are past that hurdle we have seen interest rates remain very stable since the election, but there is a new item on the horizon… the “Fiscal Cliff.”
One of my most frequently asked questions is “What is going to happen with interest rates?” While it is always tough to predict the future of interest rates, the looming “Fiscal Cliff” is making this an especially difficult question right now. The uncertainty around the “Fiscal Cliff” negotiations is making for a very volatile interest rate environment. We may see large swings in interest rates in the near future as news and speculation about the Congressional negotiations will be at the forefront of everyone’s mind. If you are thinking about buying or refinancing and you get caught on the wrong side of one of these interest rate swings, you may find yourself with a less than desirable interest rate on your new loan.
Here’s the advice that I give to all of my clients regarding interest rates and it is especially important in uncertain times like today: If you are happy with the rate that you are quoted… LOCK IT IN. The benefit of floating your interest rate in hopes of getting a lower rate is far out-weighed right now by the risk that rates may go up in the short-term. So if you’re happy with your quote, lock it in and rest easy until your closing!
Title Spotlight
Should you Take Title as Joint Tenants, or Tenants in Common?
When multiple buyers contract to purchase a home, they need to choose whether to take title from the seller as joint tenants with rights of survivorship, or tenants in common. Since their choice may have important and lasting consequences, they need to choose thoughtfully.
When two or more people own property as either joint tenants or as tenants in common, each person technically owns an undivided interest in the whole property. For instances, with two owners, each person will own an undivided 50 percent interest in the entire property, but this 50 percent does not relate to any specific half of the property, like west wing or east wing.
The main difference between joint tenants and tenants in common is the “rights of survivorship.” When a joint tenant dies, the property will transfer to the other owner or owners. This passing of interest is automatic, without the necessity of probating the estate. With tenants in common, the interest owned by the deceased does not automatically pass to the surviving owners. Instead, it passes to the estate of the deceased.
While joint tenancy may be appropriate for spouses, it’s probably not appropriate when multiple investors own an investment property. Investors will typically take title as tenants in common so that a particular owner’s share will remain in that owner’s estate upon death. Tenant-in-common ownership with investors also allows the investors to designate different shares of ownership, such as a 60/40 ownership rather than 50/50.
Author: Greg Parham, Esq.
Greg is a Colorado real estate attorney providing legal counsel to Canyon Title Company and a variety of real estate professionals, investors, and small businesses throughout Colorado. To read more articles follow Greg’s blog at www.ParhamLawFirm.com